The World Bank has expressed significant concerns regarding the spending priorities of Nigerian state governments, particularly in light of recent revenue increases from economic reforms. During the launch of BudgIT’s 2026 State of States Report in Abuja, the global lender noted that while there has been a rise in spending on essential public services, investments in transport infrastructure have outpaced those in education, healthcare, and social protection.

Gloria Joseph-Raji, a Senior Economist at the World Bank Nigeria Office, highlighted that although spending on critical sectors has increased, it has not kept pace with the rapid growth in transport infrastructure investments. This trend is particularly alarming in states that already exhibit weak human development indicators. Joseph-Raji pointed out that the World Bank's October Nigeria Development Update, which analyzed budget implementation across all 36 states, found a notable expansion in transport infrastructure and a reduction in domestic debt, primarily due to enhanced fiscal allocations.

The economist attributed these revenue increases to several factors, including the removal of petrol subsidies, unification of exchange rates, and improved tax administration since 2023. Additionally, federal intervention funds and the resolution of long-standing obligations to states have played a role in bolstering state finances. "These additional resources have enabled states to meet salary obligations and created opportunities for improved public service delivery," she stated.

However, Joseph-Raji cautioned that states remain overly reliant on Federation Account allocations, which expose them to fluctuations in federally shared revenue. She revealed that in 2025, federation transfers constituted over 75% of revenue for nearly all states, with federation transfers accounting for 73% of aggregate state revenues between 2021 and 2025, excluding Lagos. Alarmingly, only two states managed to generate enough internally to cover their recurrent expenditures.

BudgIT’s Country Director, Vahyala Kwaga, provided further insights, noting that aggregate revenue across 34 states surged from N4.99 trillion in 2022 to N15.53 trillion in 2025. This increase was driven by a staggering 232% rise in FAAC allocations, from N3.43 trillion to N11.38 trillion during the same period. Despite this revenue growth, Kwaga reported that states had only utilized N8.60 trillion, or 24.4% of their combined approved budgets of N35.22 trillion, by June 2026.

Kwaga emphasized the need for states to assess the effectiveness of their resource deployment and prioritize spending that yields tangible outcomes for citizens. BudgIT has revised its assessment approach to focus on spending in key areas such as education, healthcare, agriculture, and sanitation, alongside evaluating revenue performance and debt sustainability.

In a related discussion, Adejoke Akinbode, BudgIT’s Head of Research and Policy Advisory, revealed that total debt across the assessed states rose by 10.41%, climbing from N10.57 trillion in 2024 to N11.67 trillion in 2025. Lagos emerged as the most indebted state, with a debt of N2.9 trillion, while Osun allocated N100.17 billion for debt servicing, which accounted for 28.6% of its revenue.

Dr. Iboro Nelson, an economist and lecturer, criticized the state governments for failing to translate rising revenues into meaningful support for households facing economic difficulties. He noted that while states budgeted N1.32 trillion for healthcare in 2024, only N816.64 billion was spent, and education expenditure fell short of the N2.41 trillion budgeted, totaling N1.61 trillion.

Joy Ehinor-Esezobor, a Programme Manager at the Ford Foundation, echoed the sentiment that fiscal success should be measured by the improvement in citizens’ lives rather than mere revenue growth. She urged state governments to prioritize better services and enhanced living conditions as the ultimate indicators of success.